Left behind

On a Federal Housing Credit

Published
4:00 am PST, Saturday, November 14, 2009

For more than 20 years, a federal tax credit has played an essential part in financing 2 million below-market housing units nationwide. In ultra-costly San Francisco, dozens of projects from Bernal Heights to Chinatown have tapped the credits to build thousands of apartments.

But the Wall Street meltdown, which has devastated the lending and housing markets, is wreaking havoc on this productive program. Major financial institutions, once steady customers of the tax credits, don't have profits to safeguard and aren't lining up to buy the credits. A total of $9 billion in credits were sold in 2007, a figure that tailed off to $5.5 billion last year with a further drop expected this year.

If the country values affordable housing - and the job-creating benefits that go with new construction - it's time to update this essential program.

Among the ideas for Congress to consider is broadening the pool of eligible buyers of the tax credits. Also, it may make sense to allow current holders to bank the credits until sunnier economic times. A third change would allow state housing agencies to cash in unsalable credits in Washington.

The tax credit turmoil comes with a telling side story. Earlier this month, Congress jumped at the chance to renew a $8,000 tax break for home buyers, a popular vote-getter also backed by the real estate industry looking to fill empty subdivisions.

Affordable housing advocates tried to climb aboard with their proposal to fix the ailing low-income tax credit program. But it didn't happen because low-income housing doesn't have great political clout.

With housing prices at a low point, it's tempting to think that low-wage families (think $60,000 per year for a family of four in San Francisco) have a better chance in the housing market as rents drop. But the gap between market prices and affordability remains daunting.